Principles of Accounting and Taxation cheat sheet

Key terms

Management

Needs detailed, timely information to plan, control and make operating decisions.

Investors and shareholders

Need information to assess risk and return, and to hold management accountable.

Creditors and lenders

Need to assess the entity's ability to repay what it owes.

Employees

Need information on job security and the employer's ability to pay wages and benefits.

Government and tax authorities (KRA)

Need information to assess tax liability and monitor compliance (see the taxation chapters).

Customers and suppliers

Need assurance of the entity's stability, particularly for a long-term trading relationship.

The public

Has an interest in an entity's contribution to the economy and community, especially a large or public-sector one.

IFRS (International Financial Reporting Standards)

Set by the IASB; govern how private-sector entities recognise, measure and present transactions, so financial statements are comparable across entities and borders.

IAS (International Accounting Standards)

The IASB's predecessor body's standards, many still in force alongside newer IFRS, together forming the same body of standards.

IPSAS (International Public Sector Accounting Standards)

Set by the IPSASB specifically for government and public-sector entities (see public sector accounting in the chapter on not-for-profit organisations), adapting private-sector principles to a non-profit, budget-driven context.

ICPAK

The Institute of Certified Public Accountants of Kenya, the professional body regulating accountants in Kenya and enforcing professional and ethical standards.

IASB

The International Accounting Standards Board, which issues IFRS.

IAESB

The International Accounting Education Standards Board, which sets the education and competence requirements for the accounting profession globally.

IPSASB

The International Public Sector Accounting Standards Board, which issues IPSAS.

The Companies Act, 2015

Kenya's statute governing company formation, share capital and the preparation and filing of financial statements (see the chapter on simple company accounts), of direct relevance to a company secretary's own duties.

Going concern

Assumes the entity will continue operating for the foreseeable future, unless there is evidence otherwise.

Accrual

Recognises transactions when they occur, not when cash changes hands.

Consistency

Applies the same accounting treatment from one period to the next, so results are comparable.

Prudence

Exercises caution, not overstating assets or income, nor understating liabilities or expenses.

Materiality

Includes only information significant enough to influence a user's decisions.

Business entity

Treats the business as separate from its owner(s) for accounting purposes.

Money measurement

Records only transactions expressible in monetary terms.

Historical cost

Records assets at their original cost, not current market value, unless a standard requires otherwise.

Matching (matching/accruals)

Matches expenses to the revenue they helped generate, in the same period.

Dual aspect

Every transaction has two effects, the basis of double-entry bookkeeping (see the chapter on accounting procedures).